Over the next three years, 180 solar manufacturers will either hit the skids or become targets for acquisition, according to a report just released by Boston-based GTM Research.
The largest number (88) of casualties will exit high-cost manufacturing markets in the United States, Europe, and Canada, the analysts predict. Five out of seven of the sturdiest survivors will have plants based in China.
The report, “Global PV Module Manufacturing 2013: Competitive Positioning, Consolidation and the China Factor,” identifies several factors responsible for the coming solar death spiral: A continuing oversupply of modules, in excess of demand by an average of 325 gigawatts per year over the next three years; will combine with cut-rate silicon, pricing wars, retraction of government funding, and a level-off in demand to cause a consolidation that has been expected since 2009—and which we have begun to see recently, with the demise of prior leader Q-Cells and the financial difficulties of BP Solar.
"It's the devil or the deep blue sea for the majority of these high-cost firms," said Shyam (News - Alert) Mehta, senior analyst at GTM and the report's author. "Manufacturing costs for firms in Europe, the United States and Japan are currently over 80 cents per watt. The cost for their Chinese competitors is between 58 cents and 68 cents per watt. The writing is on the wall; these companies will either take what they can get via acquisition, or they will bow out."
Bonn-based SolarWorld—which has helped to incite a protectionist trade battle on two continents since last year, will be a prime target for acquisition, GTM forecasts. Others attractive prospects include Conergy of Germany, and Isofoton and Solaria Energy of Spain.
While part of the report’s consolidation analysis focuses on companies operating in high-cost PV manufacturing markets, the question of Chinese module manufacturers, their strategies in the face of U.S. and potentially European import tariffs, as well as their domestic demand, debt and diversity are explored extensively in the report. The report estimates that 54 of the 180 ill-fated firms will come from China.
Most of these are so-called "solar zombies"—companies with manufacturing capacities of less than 300 megawatts (MW) that have operated with the advantage of government support. China's number of ill-fated firms could be much higher if not for an aggressive downstream build-out that will prop up some domestic suppliers, according to the analysts. Indeed, China's recent announcement of its intention to increase its cumulative 2015 solar target from 15 gigawatts (GW) to 21 GW will most likely provide captive demand for firms such as Alex Solar, LDK Solar, and Astronergy.
What’s more, as evidenced by the municipal loan to LDK Solar in July 2012 and the China Development Bank's renewal of its pledge to support a discrete dozen domestic suppliers, GTM anticipates that the Chinese government will continue to provide financial support to established firms with large workforces, in order to cover near-term debt obligations; or possibly encourage diversified Chinese industrial conglomerates to acquire these companies. Potential beneficiaries of these strategies include Trina Solar, Yingli Green Energy, Suntech Power, JA Solar, Jinko Solar and Renesola; these companies comprise more than 20 percent of existing global module capacity.
"To date, the consolidation in the PV manufacturing space that has occurred has done very little to relieve the industry of the ongoing problem of overcapacity," commented Mehta. "Profitability in the PV supply chain will continue to be extremely challenged until and unless there is significant capacity rationalization in China. For numerous reasons, we do expect this to start taking place in 2013. Combined with the exit of most firms in higher-cost locations and a stronger end-market, 2014 should see a more stable balance between supply and demand, which will position a select group of suppliers for sustained profitability.
“However,” he continued, “the road ahead will be strewn with casualties: between 2012 and 2014, we estimate that nearly 60 percent of existing PV suppliers will be forced to exit the market."
After the market consolidation, GTM predicts that the following firms (listed alphabetically) will lead the industry:
- Canadian Solar (now based in Canada, with operations in China); -
- First Solar (United States);
- Hanwha Group (based in China, and as of August, the new owner of Q-Cells);
- JA Solar (China)
- Jinko Solar (China);
- SunPower (United States);
- Talesun, (China); and
- Yingli Solar (China).
Whether GTM has picked the real winners (and losers) is hard to say. However, as the solar industry matures and consolidates, the successful technology, standards, and sales propositions all are bound to be carried forward globally by just a very fortunate few.
Edited by Brooke Neuman